Cadence Design Systems (CDNS) - Company Research

Last Updated: 23 August 2026

Cadence Design Systems sells the software that chips are designed with. It is one half of an effective duopoly with Synopsys in electronic design automation, and over the last three years it has spent heavily to extend from chip design into the wider world of simulation and physical modelling. Fiscal 2025 revenue reached $5.30bn, up 14.1%, and the first half of 2026 has run hotter still, with Q2 revenue up 24.2% and backlog at a record $8.1bn. Against that, the shares are roughly 23% below their June 2026 high, the company is three years into a five-year federal probation over export-control violations, and the market has begun asking out loud whether agentic AI eventually commoditises the tools Cadence rents out. This report sets out what the filings say, without opinions or price targets. Live price action is on our Live Charts page.

1. Company Snapshot

Field	Value
Ticker / exchange	CDNS, Nasdaq Global Select Market
Sector / industry	Information Technology — electronic design automation, semiconductor IP, system design and analysis software
Headquarters	San Jose, California, United States
Founded	1988, from the merger of SDA Systems and ECAD
CEO / Leadership	Anirudh Devgan, President and Chief Executive Officer (CEO since December 2021). John M. Wall, Senior Vice President and Chief Financial Officer
Employees	Approximately 13,800 as at 31 December 2025 (FY2025 Form 10-K)
Revenue (FY2025)	$5,296.8m, up 14.1% year on year
Net income (FY2025)	$1,108.9m GAAP; GAAP diluted EPS $4.06
Trailing twelve month revenue	$5,837.6m to 30 June 2026
Share price	$319.02 at the close on 21 August 2026
Market cap	Approximately $87.99bn (21 August 2026)
Dividend	None. Cadence has never paid a cash dividend; capital is returned through buybacks
Fiscal year end	31 December (calendar-year basis from fiscal 2023 onward)

2. Bull and Bear Case

Bull Case

• Duopoly economics in a structurally growing market: Cadence and Synopsys together hold roughly 60% of the electronic design automation market, with Siemens EDA taking most of the remainder. Gross margin runs near 86% and FY2025 non-GAAP operating margin was 44.6%. Chip complexity rises every node, and design tools are a small cost line inside a very large capital decision.
• Growth is accelerating, not fading: revenue grew 14.1% in FY2025 and 24.2% year on year in Q2 2026. Backlog reached a record $8.1bn at 30 June 2026 and current remaining performance obligations rose to $4.2bn from $3.5bn nine months earlier. Management has raised full-year 2026 revenue guidance twice, most recently on 27 July 2026 to $6.26bn to $6.34bn.
• The Hexagon deal buys a second engine: completing the roughly €2.7bn acquisition of Hexagon's Design and Engineering business on 23 February 2026 pushed Cadence properly into multiphysics simulation. System Design and Analysis revenue grew 37% year on year in Q2 2026 and now represents 17% of the mix, up from 15% a year earlier.
• Cadence is building the AI layer rather than waiting for it: the AI Super Agents portfolio (ChipStack, ViraStack, InnoStack and AuraStack) now spans chip, PCB and packaging design. The NVIDIA partnership announced 15 April 2026 puts Cadence solvers on CUDA-X and Omniverse, and the Millennium M2000 supercomputer is being sold as a physical product alongside the software.

Bear Case

• Valuation leaves nothing to chance: at $319.02 the shares trade on roughly 63x trailing GAAP earnings, 39x trailing non-GAAP earnings, 15x trailing sales and about 52x trailing free cash flow. That is priced for sustained high-teens growth and full delivery on the Hexagon integration.
• AI could commoditise the toolchain it is meant to sell: the shares fell 9.6% in a single July 2026 session after Moonshot AI disclosed that its Kimi K3 model had completed a full semiconductor design flow autonomously in 48 hours using only open-source EDA tools. Whether or not that scales, it crystallised the risk that the agent layer, not the tool layer, captures the value.
• China is both a growth driver and a policy hostage: China was 13% of FY2025 revenue and 15% of Q2 2026 revenue. The 2025 quarterly path of 11%, 9%, 18% and 12% shows exactly how quickly a licence action closes the tap; the Bureau of Industry and Security imposed licence requirements in May 2025 and rescinded them in early July 2025.
• The balance sheet has flipped from net cash to net debt: Cadence paid $2.10bn in cash for acquisitions in the first half of 2026. Cash fell from $3.00bn at year-end to $1.44bn at 30 June 2026 against $2.48bn of long-term debt. Goodwill and acquired intangibles of $6.79bn now nearly equal total equity of $6.86bn, and intangible amortisation has risen from 2% to 5% of revenue, cutting the FY2026 GAAP EPS guide even as revenue guidance rose.

3. Revenue Segments

Cadence does not report conventional operating segments. It discloses a revenue mix by product category, shown below for fiscal 2025.

Segment / product category	% of revenue	What it is
Core EDA	70% (FY2025); 68% in Q2 2026	Digital and custom chip design, verification, simulation and the Palladium Z3 and Protium X3 hardware emulation and prototyping systems. Grew about 13% in FY2025 and 18% year on year in Q2 2026.
System Design and Analysis	16% (FY2025); 17% in Q2 2026	Multiphysics simulation, PCB and package design, 3D-IC and, since February 2026, the acquired Hexagon Design and Engineering portfolio. Grew about 13% in FY2025 and 37% year on year in Q2 2026.
Semiconductor IP	14% (FY2025); 15% in Q2 2026	Licensed silicon building blocks including HBM, UCIe, PCIe, DDR and SerDes interfaces, plus the Arm Artisan foundation IP business acquired in August 2025. Grew about 25% in FY2025 and more than 40% year on year in Q2 2026.

By geography in fiscal 2025: Americas 47%, Other Asia 19%, Europe, Middle East and Africa 15%, China 13% and Japan 6%. By revenue type, product and maintenance was $4,822m or 91% of the total, with services at $475m or 9%.

4. Business Model and Moat

How it makes money. Cadence licenses computational software under mostly time-based licences, with revenue recognised ratably across the licence term. Emulation and prototyping hardware, and certain IP arrangements, are recognised upfront, which is why hardware-heavy quarters distort both revenue growth and margin. Product and maintenance was 91% of fiscal 2025 revenue and services 9%. The ratable model is what allows management to guide a full year with the precision it does.

Where the switching costs sit. A design team that has taped out on a Cadence flow has calibrated its methodology, its foundry-certified reference flows and its verification signoff against those specific tools. Changing vendor mid-programme risks a respin, and a respin at an advanced node costs vastly more than the licence. Cadence reinforces this with foundry certification: AI reference flows certified for Intel 18A-P and Intel 14A in July 2026, and flows across TSMC N3, N2, A16 and A14 announced in April 2026.

Visibility is the real asset. Backlog stood at $8.1bn at 30 June 2026, up from $7.8bn at the end of 2025 and $7.0bn at 30 September 2025. Contracted but unsatisfied performance obligations were $7.8bn at 31 December 2025, of which management expected to recognise 53% within twelve months. Current remaining performance obligations rose to $4.2bn at 30 June 2026.

Reinvestment intensity. Research and development was $1,768.8m in fiscal 2025, or 33.4% of revenue, up from $1,549.1m in fiscal 2024. First-half 2026 R&D was $1,039.7m against $881.2m a year earlier. This is a business that spends a third of its revenue defending its position.

5. Financial Health

All figures below are taken from Cadence's Form 10-K filings, quarterly earnings press releases and SEC XBRL company facts. Cadence has never paid a cash dividend, so that column reads Nil throughout.

Fiscal Year	Revenue ($m)	YoY %	GAAP EPS	Adjusted EPS	Dividend/share	Long-term debt (YE)
FY2021 (ended 1 Jan 2022)	2,988.2	+11.4%	$2.50	$3.29	Nil	$347.6m
FY2022	3,561.7	+19.2%	$3.09	$4.27	Nil	$648.1m
FY2023	4,090.0	+14.8%	$3.82	$5.15	Nil	$299.8m†
FY2024	4,641.3	+13.5%	$3.85	$5.97	Nil	$2,476.2m
FY2025	5,296.8	+14.1%	$4.06	$7.14	Nil	$2,480.2m

† A further $349.3m was classified as the current portion of long-term debt at 31 December 2023. The step-up in fiscal 2024 reflects $3.197bn of debt issued against $1.350bn repaid during that year. Adjusted EPS is Cadence's own non-GAAP diluted EPS as reported in each year's Q4 earnings release.

Quarter / Half	Revenue ($m)	Adjusted EPS	GAAP EPS
Q2 2026 (ended 30 Jun 2026)	1,584.5	$2.11	$1.33
Q1 2026	1,474.2	$1.96	$1.23
Q4 2025	1,440.1	$1.99	$1.42
Q3 2025	1,338.8	$1.93	$1.05
Q2 2025	1,275.4	$1.65	$0.59‡
Q1 2025	1,242.4	$1.57	$1.00
FY2025 total	5,296.8	$7.14	$4.06

‡ Q2 2025 GAAP EPS carries a $128.5m charge for the contingent liability relating to the export-control settlement, which cost 10.1 percentage points of GAAP operating margin and $0.47 of GAAP EPS in that quarter.

Cash flow and balance sheet, fiscal 2025. Operating cash flow was $1,728.8m against capital expenditure of $141.9m, giving free cash flow of $1,586.9m. Depreciation and amortisation was $227.8m and GAAP operating income was $1,492.0m, a 28.2% margin. Cash and equivalents stood at $3,001.3m with short-term investments of $154.2m, against long-term debt of $2,480.2m and no current portion. Fiscal 2025 share buybacks were $925.0m.

What changed in the first half of 2026. Operating cash flow of $990.7m and capital expenditure of $101.4m were overwhelmed by $2,100.3m of cash paid for business combinations. Cash fell to $1,440.4m at 30 June 2026 while long-term debt held at $2,482.2m, moving the group from roughly $675m of net cash at year-end to about $1.04bn of net debt. Goodwill rose from $2,749.1m to $4,914.8m and acquired intangibles from $718.2m to $1,874.5m. Depreciation and amortisation nearly doubled to $201.6m for the half.

Guidance. On 27 July 2026 management raised full-year 2026 guidance for the second consecutive quarter, to revenue of $6.26bn to $6.34bn, GAAP diluted EPS of $4.76 to $4.86, non-GAAP diluted EPS of $8.05 to $8.15, non-GAAP operating margin of 43.75% to 44.75% and operating cash flow of approximately $2bn. Note that the GAAP EPS guide has fallen from the $4.95 to $5.05 range issued in February, entirely because of acquisition-related amortisation.

6. Valuation Metrics

Raw metrics, August 2026. Not opinions on whether the stock is cheap or expensive.

Metric	Value
Market cap	Approximately $87.99bn (275.8m shares at the $319.02 close on 21 August 2026)
Enterprise value	Approximately $89.0bn (market cap $87.99bn plus total debt $2.48bn less cash $1.44bn, per the 30 June 2026 balance sheet)
Trailing P/E (GAAP)	63.4x on trailing twelve month GAAP diluted EPS of $5.03 (Q3 2025 $1.05, Q4 2025 $1.42, Q1 2026 $1.23, Q2 2026 $1.33). On the equivalent trailing non-GAAP EPS of $7.99 the multiple is approximately 39.9x
P/E (forward)	39.4x on the FY2026 non-GAAP EPS guidance midpoint of $8.10, and 66.3x on the FY2026 GAAP EPS guidance midpoint of $4.81, both from the 27 July 2026 release
P/S (TTM)	15.1x (market cap $87.99bn over trailing twelve month revenue of $5,837.6m)
EV/EBITDA (TTM)	Approximately 42.5x (EV $89.0bn over EBITDA of $2,092.9m; EBITDA = trailing twelve month GAAP operating income of $1,770.1m plus trailing D&A of $322.8m, using the wider cash-flow-statement depreciation and amortisation figure. The Q2 2026 operating income component is derived from the reported 28.4% GAAP operating margin on $1,584.5m of revenue)
P/FCF	Approximately 52.4x (market cap $87.99bn over free cash flow of $1,678.7m; FCF = trailing twelve month operating cash flow $1,854.9m less capital expenditure $176.2m)
Price/book	12.8x on book value per share of $24.90
52-week high	$416.69, reached 2 June 2026
52-week low	$262.75, reached 3 February 2026
Short interest (% of float)	2.23% of a 274.2m share float, on 6.10m shares short at the 31 July 2026 settlement date. MarketBeat recorded 2.25% on 6.19m shares at the 15 July 2026 settlement
Days to cover	2.6 days at the 31 July 2026 settlement; MarketBeat calculated 4.08 days at the 15 July settlement on a lower average volume base
Dividend yield	Nil. Cadence pays no dividend

For scheduled macro events that move the semiconductor complex, see our Economic Calendar.

7. What Are They Building

AI Super Agents. ChipStack, introduced in the fourth quarter of 2025, is an agentic system for RTL design and verification that calls the underlying Cadence tools autonomously. Management reported early deployments at more than ten leading customers with productivity improvements described as up to tenfold. On 15 July 2026 Cadence launched AuraStack, billed as the first agentic AI platform for PCB and advanced packaging, completing a portfolio that with ViraStack and InnoStack now covers the full electronic system design flow.

NVIDIA and the Millennium supercomputer. At CadenceLIVE Silicon Valley on 15 and 16 April 2026, Cadence and NVIDIA announced an expanded partnership putting Cadence EDA and system design solutions onto CUDA-X, NVIDIA AI-physics libraries and Omniverse. The Millennium M2000 Supercomputer, built on NVIDIA infrastructure, is claimed to deliver up to 80 times greater throughput and up to 20 times lower power on target workloads, with named early users including Argonne National Laboratory, Honda R&D, Samsung and SK Hynix.

Google Cloud and Gemini. Announced the same week, Google's Gemini models have been integrated with the ChipStack AI Super Agent, with the combined offering distributed through Google Cloud Marketplace.

Foundry alignment. Cadence expanded its TSMC partnership in April 2026 to cover agentic AI, advanced IP and certified design flows across N3, N2, A16 and A14, including support for TSMC's NanoFlex Pro standard-cell architecture and stacked-die reference flow. In July 2026 it certified AI reference flows for Intel 18A-P and Intel 14A, and a multi-year Intel agreement covering IP, EDA and design-technology co-optimisation on Intel 14A was flagged on the Q2 2026 call as a meaningful growth driver.

Hardware. Palladium Z3 emulation and Protium X3 prototyping had a record fiscal 2025 with more than 30 new customers, and seven of the top ten customers took both platforms. Q2 2026 was another record quarter with twelve new customers.

8. Competitive Landscape

Electronic design automation is a concentrated market. TrendForce estimated 2024 shares at Synopsys 31%, Cadence 30% and Siemens EDA 13%, a combined 74%. The total EDA market was estimated at roughly $17.6bn in 2025. The competitive picture changed materially on 17 July 2025 when Synopsys closed its approximately $34.9bn acquisition of Ansys, creating a combined EDA and multiphysics business substantially larger than Cadence.

Peer	Market cap (August 2026)	Key 2025 metric
Synopsys (SNPS)	$76.18bn at the $397.87 close, 21 August 2026	FY2025 revenue $7.054bn, up 15%. FY2026 guidance of approximately $9.61bn including roughly $2.9bn from the acquired Ansys business
Keysight Technologies (KEYS)	$53.84bn at the $316.13 close, 21 August 2026	FY2025 revenue $5.37bn for the year ended 31 October 2025, up from $4.98bn
Autodesk (ADSK)	$53.59bn at the $253.83 close, 21 August 2026	FY2026 revenue $7.21bn for the year ended 31 January 2026, up 18%. Competes in mechanical and AEC design rather than EDA
Siemens EDA (part of Siemens AG)	Not separately listed	Siemens does not disclose standalone Siemens EDA revenue; it sits inside Digital Industries Software. TrendForce estimated a 13% EDA share in 2024
Ansys	No longer independent	Acquired by Synopsys, deal completed 17 July 2025 for approximately $34.9bn. Delisted and now operated as a Synopsys business

9. Insider Activity

Chief Executive Anirudh Devgan has been the largest single seller. Aggregated Form 4 data shows Cadence insiders transacted on the open market 71 times in the six months to August 2026, with zero purchases and 71 sales. Insiders collectively hold about 0.35% of shares outstanding. The table below lists the transactions that could be traced to individual filings.

Name	Date	Type	Shares	Price	Value	Plan Type
Anirudh Devgan (President and CEO)	01 Jun 2026	Sale	76,827	Approximately $401	$30.85m	Plan status not confirmed on the filing
Anirudh Devgan (President and CEO)	22 May 2026	Sale	51,887	Approximately $370	$19.20m	Plan status not confirmed on the filing
John M. Wall (SVP and CFO)	05 May 2026	Sale	5,000	$348.71	$1.74m	Rule 10b5-1 plan
Paul Cunningham (Senior Vice President)	17 Aug 2026	Option exercise and sale	2,000	$323.32 (exercise at $138.02)	$0.65m	Option exercise and disposal
Paul Cunningham (Senior Vice President)	15 Jul 2026	Option exercise and sale	2,000	$383.36 (exercise at $138.02)	$0.77m	Option exercise and disposal
Chin-Chi Teng (Senior Vice President)	22 Jun 2026	Option exercise and sale	1,000 exercised, sold in tranches	$379.18 to $388.88 (exercise at $202.94)	Approximately $0.38m	Option exercise and disposal
Ita M. Brennan (Director)	17 Mar 2026	Sale	Small tranches of 3 to 73 shares	$293.53 to $300.29	Not material	Plan status not confirmed on the filing

The pattern is worth reading carefully rather than dramatically. Devgan's sales came at $370 and $401, close to the June high, and the two Cunningham transactions are option exercises at a $138.02 strike granted years earlier. Only the Wall disposal is explicitly footnoted as a Rule 10b5-1 plan sale in the filings reviewed.

10. Key Risks

• Export controls and federal probation: on 28 July 2025 Cadence agreed to plead guilty to one count of conspiracy to commit export-control violations over sales to China's National University of Defense Technology between 2015 and 2021, with total penalties of approximately $140.6m across the Department of Justice and the Bureau of Industry and Security. The plea carries a five-year probation period running to roughly mid-2030, with mandatory compliance programme obligations and annual reporting to the DOJ. The FY2025 Form 10-K warns the settlement could trigger further inquiries by other authorities, including in China.
• China revenue concentration and policy volatility: China was 13% of fiscal 2025 revenue, approximately $689m, rising to 15% in Q2 2026. BIS imposed licence requirements on EDA sales to China on 23 May 2025 and rescinded them on 2 to 3 July 2025. Cadence's China revenue swung from 11% to 9% to 18% to 12% across the four quarters of 2025 as a direct result.
• AI disintermediation of the tool layer: the July 2026 Moonshot AI disclosure that its Kimi K3 model completed an autonomous chip design flow in 48 hours using only open-source EDA tools removed 9.6% of the market capitalisation in a session. Cadence's answer is to be the agent vendor itself, but the AI Super Agents portfolio is new, unproven at scale and not yet separately quantified in the accounts.
• Integration and balance-sheet risk from the Hexagon acquisition: $2.10bn of cash left the business in the first half of 2026. Goodwill and acquired intangibles of $6.79bn at 30 June 2026 sit against $6.86bn of total equity, and acquisition-related amortisation has risen from 2% to 5% of revenue. A write-down of any part of that carrying value would be large relative to earnings.
• Valuation compression risk: the shares have already de-rated roughly 23% from the $416.69 high of 2 June 2026 without any deterioration in reported numbers. At 39x forward non-GAAP earnings, further multiple contraction does not require an earnings miss.
• Customer concentration in a small buyer universe: Cadence sells to a limited number of large semiconductor companies, hyperscalers and system builders. Q2 2026 IP growth of more than 40% leaned heavily on a single multi-year Intel agreement, and seven of the top ten customers bought both hardware platforms in fiscal 2025. Cadence does not disclose a named customer above 10% of revenue.
• Competitive escalation from Synopsys: Synopsys guides to approximately $9.61bn of FY2026 revenue against Cadence's $6.30bn, and its Ansys acquisition directly targets the multiphysics and system analysis ground Cadence bought Hexagon and BETA CAE to occupy.

11. Recent Developments

• 17 Feb 2026 — Cadence reports fourth quarter and full-year 2025 results. Revenue of $5.297bn, up 14.1%, non-GAAP EPS of $7.14 and record backlog of $7.8bn. Initial FY2026 guidance of $5.90bn to $6.00bn revenue explicitly excluded the then-pending Hexagon transaction.
• 23 Feb 2026 — Cadence completes the acquisition of Hexagon's Design and Engineering business. The largest deal in the company's history at approximately €2.7bn, structured roughly 70% cash and 30% Cadence stock, expected to add about $160m of revenue in 2026 and pushing goodwill from $2.75bn to $4.91bn by 30 June.
• 15 Apr 2026 — Expanded NVIDIA partnership and a Google Cloud tie-up announced at CadenceLIVE. Cadence solvers accelerated on NVIDIA CUDA-X, AI-physics and Omniverse, the Millennium M2000 supercomputer introduced, and Google's Gemini models integrated into ChipStack and distributed via Google Cloud Marketplace.
• 27 Apr 2026 — First quarter 2026 results and the first guidance raise of the year. Revenue of $1.474bn, up 18.7%, non-GAAP EPS of $1.96 and backlog of $8.0bn. Full-year revenue guidance lifted to $6.125bn to $6.225bn.
• 07 May 2026 — 2026 annual meeting of stockholders held. Eleven directors elected, an amendment to the Omnibus Equity Incentive Plan approved adding five million authorised shares, say-on-pay carried and PricewaterhouseCoopers ratified as auditor for the year ending 31 December 2026.
• 02 Jun 2026 — Shares reach a 52-week high of $416.69. The stock has since fallen roughly 23% to $319.02 as of 21 August 2026 without any downgrade to company guidance.
• 15 Jul 2026 — AuraStack AI Super Agent launched. Presented as the first agentic AI platform for PCB and advanced packaging, extending the AI Super Agents portfolio across the full electronic system design flow. Separately in July, Cadence certified AI reference flows for Intel 18A-P and Intel 14A.
• 27 Jul 2026 — Second quarter 2026 results and a second guidance raise. Record revenue of $1.584bn, up 24.2%, record backlog of $8.1bn, current RPO of $4.2bn and non-GAAP EPS of $2.11. Full-year revenue guidance raised to $6.26bn to $6.34bn with non-GAAP EPS of $8.05 to $8.15 and operating cash flow of approximately $2bn.

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12. Key Dates to Watch

• 16 Sep 2026 — the archived webcast of the Q2 2026 earnings call expires, which historically marks the start of Cadence's pre-results quiet period
• Expected late October 2026 — third quarter 2026 results. No date has been confirmed as of 23 August 2026; Cadence reported Q3 2025 on 27 October 2025, Q1 2026 on 27 April 2026 and Q2 2026 on 27 July 2026
• Expected February 2027 — fourth quarter and full-year 2026 results, with initial FY2027 guidance. FY2025 results were released on 17 February 2026
• Expected April 2027 — CadenceLIVE Silicon Valley 2027, the company's main product announcement venue. The 2026 edition ran 15 to 16 April 2026
• Expected May 2027 — 2027 annual meeting of stockholders. Directors elected on 7 May 2026 serve until that meeting
• Expected mid-2030 — expiry of the five-year probation period imposed under the July 2025 export-control plea agreement, during which annual compliance reports are due to the Department of Justice

Cadence pays no dividend, so there are no ex-dividend or payment dates to track. No investor day has been announced for 2026.

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